The U.S. dollar extended its winning streak on Friday after December’s job report showed weaker-than-expected employment growth. The data suggested the Federal Reserve may keep interest rates unchanged at its upcoming January meeting, supporting continued dollar strength across global markets.

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U.S. Jobs Data Supports Dollar Strength

According to the U.S. Labor Department, the economy added only 50,000 nonfarm jobs in December 2025, below economists’ forecast of 60,000. Meanwhile, the unemployment rate fell to 4.4%, down from a revised 4.5% in November.

The slower pace of hiring provides the Federal Reserve with flexibility to maintain current interest rates, as Chair Jerome Powell indicated that policymakers are likely to hold short-term borrowing costs steady in the near term.

Steve Englander, head of global G10 FX research at Standard Chartered, noted that the standard error for nonfarm payrolls is 20,000, suggesting the market may treat the slowdown as within normal variability rather than a sign of weakness.

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Dollar Performance Across Major Currencies

• Dollar Index rose 0.25% to 99.13, on track for its second consecutive week of gains.
• Dollar vs. Swiss franc (USD/CHF) increased 0.2%, continuing its upward trajectory.
• Dollar vs. Japanese yen (USD/JPY) surged to a one-year high of 158.185, last trading at 157.88 yen.

The yen weakened further amid speculation of a snap election in Japan and stronger-than-expected household spending in November, despite the Bank of Japan raising its policy rate to a 30-year high in December.

• Euro (EUR/USD) declined 0.2% to $1.1635, marking its second straight week of losses.
• Pound sterling (GBP/USD) fell 0.24% to $1.3403.
• Canadian dollar (CAD/USD) weakened 0.32% to C$1.391 per dollar.
• Australian dollar (AUD/USD) decreased 0.13% to $0.6688.

In China, the offshore yuan (USD/CNH) saw a slight decline of 0.06% to 6.977 amid rising consumer price inflation in December, which reached its highest level in nearly three years.

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Market Implications

The latest employment data underscores a balanced U.S. labor market: slow job growth combined with a declining unemployment rate. Financial markets are now pricing in a 95% probability that the Fed will hold rates at its January 27-28 meeting, according to CME Group’s FedWatch tool, up from 68% a month ago.

The weaker payroll numbers, coupled with strong wage growth, support the dollar’s gains as investors anticipate a steady Fed policy. Meanwhile, the yen’s decline reflects domestic political uncertainty and inflation-driven rate adjustments.

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Global Economic Context

• Europe: German exports fell unexpectedly in November, though industrial output rose.
• China: Consumer price inflation surged in December, putting pressure on monetary policy.
• Cryptocurrency: Bitcoin dropped 1.05% to $90,247.14, reflecting risk-off sentiment.

Overall, the dollar’s rise demonstrates investor preference for stability amid global economic uncertainty, supported by subdued U.S. job growth and potential interest rate stability.

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Key Takeaways

• U.S. nonfarm payrolls grew 50,000 jobs in December, below forecasts.
• Unemployment rate fell to 4.4%, indicating labor market resilience.
• Dollar hit one-year highs against the Japanese yen and gained against other major currencies.
• Fed funds futures show a 95% probability of unchanged interest rates at the January meeting.
• Political and economic factors in Japan, Europe, and China are influencing currency markets.